Video: Rossen Reports: Background check mistakes cost jobs

>>>back now at 7:41 with "rossen reports." finding a new job is hard enough but now experts say there may be a hidden flaw that can ruin your chance of getting hired. today national investigative correspondent
jeff rossen
is here with the details.

>>good morning. we all know when you apply for a job most employers will do a
criminal background check
. we do them here. nothing to worry about, right? because you're not a criminal. well, think again. experts say the
background check
companies are causing innocent people to lose jobs, mistaking them for drug felons, armed robbers, even
sex offenders
. it happened to
catherine taylor
. a
stay at home mom
looking to get back to work. the
red cross
wanted to hire her. as an accountant.

>>i was supposed to start work the following week.

>> reporter: but then suddenly
catherine
's job offer was yanked. a
criminal background check
had come back with a long
rap sheet
of drug felonies. the problem is, it wasn't her.

>>i was devastated. it was like my whole world was just torn apart.

>> reporter: the company hired to run the
background check
in
2006
, choicepoint, one of the biggest, mixed her up with this
catherine taylor
, a repeat drug offender with the same date of birth but nothing else in common. they didn't even live in the same state.

>>i have never been convicted of anything, nonetheless have a traffic ticket.

>> reporter: consumer advocates say these mistakes are happening far too often. take
leonard smith
. when he applied for a job the
background check
company, sterling info systems, confused him with this
sex offender
, who was in prison at the time. it also happened to
james hines
, an innocent dad. the
background check
company adp mixed him up with michael
james hines
, a convicted
sex offender
in a different state. they don't even have the same first name. the companies say accuracy is important, but errors do happen.

>>consumers are losing jobs by the thousands every year because of bad
background checks
that are run on them.

>> reporter: jim francis
is an attorney specializing in these cases. he says too often
background check
companies rely solely on computers to match the data with no one checking to make sure the results are correct. a billion dollar industry, he says, that is well aware of the problem. if the companies know this problem exists, why not just fix it?

>>they would have to spend money on personnel and instituting procedures which would carve into their profits.

>> reporter: under
federal law
, the companies are required to use reasonable procedures to assure maximum possible accuracy.

>>the error rate is less than 10%.

>>we went straight to the industry group representing those companies.

>>accuracy is paramount.

>> reporter: how do you explain background companies coming back with a different date of birth, different state, just matching a first and last name in some cases. does that seem accurate to you?

>>it -- what i will say to that is that the most important thing is to let viewers know how
background checks
are conducted. you're speaking of hypotheticals.

>> reporter: we asked her about a
real life
example. i want to show you a picture. this woman's name is
catherine taylor
. she lives in arkansas and applied for a job with the local
red cross
. the
background check
comes back and says she has a long
rap sheet
of drug felonies. turns out they mistook her with this woman who lives in a different state. how does this happen?

>>you know, if there are errors in a report individuals do have an opportunity to contest it so i'm sorry. i just don't know all the facts of that particular case.

>> reporter: catherine
did contest it but by the time choicepoint cleared it up, that job was long gone.

>>they need to have tighter, stricter controls. you're talking about human lives. this has got to stop.

>>the company that ran
catherine taylor
's
background check
was bought by
lexus nexus
. they say their systems have since improved and now they have a 99.8% accuracy rate. experts say if this happens to you, you don't have many options, unfortunately. you can contact the
background check
company as
catherine
did and dispute it. the problem is, they have
30 days
to investigate. by then the job could be long gone as it was with
catherine
. the only other option unfortunately, savannah, is to sue the company but once again the job isn't there when you want it. they just go down the list.

>>doesn't remedy it if you don't get the job. thanks for bringing the story. appreciate

Finding a new job is hard enough, but experts say there may be a hidden flaw when you apply, that can ruin your chance of getting hired. TODAY National Investigative Correspondent Jeff Rossen has the details.

When you apply for a job, most employers will do a criminal background check. Nothing to worry about, right? Because you're not a criminal. Think again. Experts say those background check companies are causing innocent people to lose jobs, mistaken for drug felons, armed robbers, even sex offenders.

“I was devastated,” Taylor said. “It was like my whole world was just torn apart.”

The company hired to run the background check in 2006, Choicepoint, one of the biggest, had mixed her up with another Catherine Taylor, a repeat drug offender with same date of birth, but nothing else in common. They didn't even live in the same state.

“I have never been convicted of anything, (not even) a traffic ticket,” Taylor said.

Consumer advocates say these mistakes are happening far too often.

Take Leonard Smith. When he applied for a job, the background company, Sterling Infosystems, confused him with a sex offender who was in prison at the time.

It also happened to James Hines, an innocent dad. When he applied for a job, the background check company, ADP, confused him with Michael James Hines, a convicted sex offender in a different state. They don't even have the same first name.

“Consumers are losing jobs by the thousands because of the bad background checks that are run on them,” attorney Jim Francis told us.

Francis specializes in these cases. He says, too often, background check companies rely solely on computers to match the data, with no one checking to make sure the results are correct — a billion-dollar industry, he says, that is well aware of the problem.

“I, you know, if there are errors in a report, individuals do have an opportunity to contest it,” said Miller. “So I don’t, I’m sorry I just don’t know the facts of that particular case that you just raised.”

Catherine did contest it, but by the time Choicepoint cleared it up, that job was long gone.

“They need to have stricter controls,” Taylor told us. “You're talking about human lives, their livelihood, the way that they want to provide for themselves and their families. This has got to stop.”

The company that ran Catherine Taylor's report was bought by Lexis Nexis. They say their systems have improved, and they now have a 99.8 percent accuracy rate.

Experts say that if this happens to you, you don't have many options. You can contact the background check company and dispute it. Problem is, they have 30 days to investigate. By then, the job could be long gone. The only other option is to sue.